Russian spacecraft lost to apparent engine failure uninsured

The unmanned Russian supply ship Progress failed to reach orbit Wednesday after it launched from the Baikonur Space Center in Kazakhstan./ AP Photo

BAIKONUR, Kazakhstan—The Russian spacecraft Progress, which was lost Wednesday after failing to reach orbit, had 3 billion rubles ($103.2 million) in third-party liability coverage, but no insurance covering the craft, market sources confirmed.

A rocket engine failure is believed to have caused the Progress, which was to operate as a freighter carrying food and other supplies to the International Space Station, to fall to earth in a region of Siberia after its launch from the Baikonur Space Center in Baikonur, Kazakhstan.

The Russian Insurance Center wrote the third-party liability coverage with a policy period of 30 days for a successful launch and 365 days if the craft failed to achieve orbit, sources in the space insurance market confirmed.

Disposable vehicle

About 40% of the liability risk was reinsured in the international reinsurance market, sources said. No coverage was written to insure the craft, they said, and the value of the Progress was not known.

The resupply vehicles are disposable, an insurance market source said. After unloading at the space station, the spacecraft are used to store trash and burn up after re-entry into the earth's atmosphere, he said.

The liability coverage on the Progress was written for the Center for Operation of Ground-Based Space Infrastructure, or TsENKI, a Russian agency that operates launches.

Market impact

The loss of the Progress won't affect the space insurance market, but the Aug. 18 malfunction of a Russian Proton rocket that kept a communications satellite out of its proper orbit could produce a loss large enough to have an impact, said Simon Clapham, London-based head of space underwriting at Liberty Syndicates, a Liberty Mutual Group Inc.-owned Lloyd's of London insurer.

“That could be a $300 million loss to the insurance market,” Mr. Clapham said of the Proton loss. “If they can't find out what caused the loss quickly, there will be a delay in launches, which will cause premiums to fall and combined ratios to increase.”

That, in turn, would lead to higher space insurance rates, Mr. Clapham said. Space insurance experts said this year that rates were expected to continue declining and coverage terms were likely to broaden, assuming competition remained fierce and claims were benign.